California Gov. Gavin Newsom and Democrats in the state’s Legislature introduced a bill that would fine oil companies for making too much money. The governor has called a special session to consider the bill, which is vaguely worded and does not describe how much profit is too much profit.
If it passes, California would be the first state to fine oil companies for price gouging.
The proposal lacks specifics; Newsom’s office said those would be negotiated with lawmakers.
Gas prices in California are higher than in most places because of the government taxes and fees, as well as regulatory burdens. For every gallon of gas in California, drivers pay:
- 54 cents in state excise tax
- 18.4 cents in federal excise tax
- 23 cents for California’s cap-and-trade program to lower greenhouse gas emissions
- 18 cents for the state’s low-carbon fuel programs
- 2 cents for underground gas storage fees
- 3.7% in other state and local sales taxes
California gas also prices vary from county to county but today the price averages $4.62 statewide, compared with Alaska’s average of about $4.00, according to AAA.
California has a complicated relationship with oil and gas. For the past few summers the state faced rolling energy blackouts because it doesn’t have enough power to supply all consumers. This year, the legislature added funds to buy fossil fuels from the very gas power plants that will start shutting down next in 2023, as the state the state tries to become carbon neutral by 2045.
Last week, Gov. Newsom criticized five oil refiners for refusing to show up at a state hearing on gas price spikes.
The five major oil refiners — Chevron, Marathon, Phillips 66, PBF Energy and Valero — rejected invites to the hearing, Newsom’s office wrote.
“Every Californian deserves to know why we were being fleeced at the pump even as gas prices declined across the country and crude oil prices were going down. The oil industry had their chance today to explain why they made record profits at our expense but they chose to stonewall us. That’s because they have no explanation – big polluters are lining their pockets while they cause financial pain for millions of California families and threaten the very future of our planet. With the Legislature’s support and engagement, we’re going to hold these companies accountable with a price gouging penalty that will deliver relief to Californians,” Newsom said.
The governor’s office reported that in the third quarter of 2022, oil companies reported record high profits:
- Phillips 66 profits jumped to $5.4 billion, a 1243% increase over last year’s $402 million;
- BP posted $8.2 billion in profits, its second-highest on record, with $2.5 billion going towards share buybacks that benefit Wall Street investors;
- Marathon Petroleum profits rose to $4.48 billion, a 545% increase over last year’s $694 million;
- Valero’s $2.82 billion in profits that were 500% higher than the year before;
- PBF Energy’s $1.06 billion that was 1700% higher than the year before;
- Shell reported a $9.45 billion haul that sent $4 billion to shareholders for stock buybacks;
- Exxon reported their highest-ever $19.7 billion in profits;
- Chevron reported $11.2 billion in profits, their second-highest quarterly profit ever.
Newsom, who is rumored to be planning to run for president, has taken credit for lowering prices. “Governor Newsom has taken action to lower prices at the pump, ordering the switch to winter-blend gasoline and demanding accountability from oil companies and refiners that do business in California, leading to record relief at the pump for consumers. Since California’s record-high gas prices of $6.42, the Governor’s actions have reduced those prices to $4.99 most recently – a decrease of $1.43 since the peak,” his office said.
Prices at the pump have dropped in part because of the hundred of millions of barrels of oil being released from the Strategic Petroleum Reserve by the Biden Administration.
The SPR has been depleted since Biden took office from 640 million barrels to 387 million barrels.